ClientEarth response to HM Treasury consultation on Future Regulatory Framework Review proposals
HM Treasury established the Future Regulatory Framework Review to consider how the financial services regulatory framework should be updated, in particular to reflect the UK’s new position outside of the EU. As part of this, HM Treasury is considering changes to the Financial Conduct Authority and Prudential Regulation Authority’s objectives and regulatory principles set out in the Financial Services and Markets Act 2000.
This review provides an opportunity to embed environmental objectives into the regulatory framework, so that the financial systems plays an appropriate role in supporting the mitigation of climate change and the protection of the natural world.
In this consultation response, we propose:
- Climate objective: The FCA and PRA should be given a new objective in relation to climate change, which requires them to support all of the UK’s climate targets (including the 2050 net-zero emissions target, interim carbon budgets, nationally determined contributions and the Paris Agreement goal to limit global warming to 1.5°C above pre-industrial levels).
- Nature and biodiversity regulatory principle: A new regulatory principle should be added that requires the FCA and PRA to have regard to the desirability of restoring and conserving nature and protecting biodiversity internationally in a manner that respects the rights of affected local communities and indigenous peoples.
- Clarification of the growth and competitiveness objective: HM Treasury is proposing a new objective for the FCA and PRA to support the growth and international competitiveness of the UK economy (including the financial sector). If this objective is added, it must be made clear that it cannot be used as a reason for deregulation that negatively impacts the FCA/PRA achieving their other objectives (including the new climate objective).